Home > Uncategorized > Structuring globalization to redistribute income upward

Structuring globalization to redistribute income upward

from Dean Baker

The Washington Post ran a piece on how patterns of globalization may be changed due to the pandemic. It is more than a bit confused in not distinguishing short-term effects from long-term effects and its inability to distinguish between problems caused by fiscal policy and policies caused by the fallout from the pandemic.

The headline for the piece on the Post’s homepage is “Covid-19 is erasing decades of economic gains achieved through globalization.” The subhead is “The way we travel, work, consume, invest, interact, migrate, cooperate on global problems and pursue prosperity has likely been changed for years to come.”

Literally nothing in the piece supports the claim in the headline and insofar as items in the piece support the subhead it is at least as likely to be positive as negative. The gist of the piece is that we have seen a massive reduction in trade and travel as a result of the pandemic. While some of this may prove to be permanent, the piece gives us no reason to believe that the bulk of trade will not return to normal once the pandemic has been brought under control, either with effective treatments or with a vaccine.

In terms of travel, any enduring effect is likely to be largely positive. An enormous amount of resources is now wasted on business travel and conventions that can be just as effectively performed on-line. This realization will free up a large amount of resources for more productive uses, such as health care, child care, and stopping global warming. Of course, less travel by itself will be a big help in reducing worldwide  greenhouse gas emissions.

In addition, the increased use of telecommuting will allow tens of millions of people to avoid unnecessary trips to their offices, leading to both an enormous saving of both time and energy. This will also free up resources for more productive purposes. This change should also help reduce inequality, since so much wealth and income that had been concentrated in major cities like New York and San Francisco will now be dispersed more widely across the country. There will undoubtedly be similar patterns in other countries.

At one point the piece warns of restrictions on foreign investment being considered in Italy and then offers the warning:

“The new restrictions have raised an alarm among Italian industrialists, who say their country’s long-stagnant economy will need more foreign capital, not less, to emerge from this crisis.”

While Italy does need more investment, the problem is that European leaders have chosen to limit the ability of euro zone countries like Italy to finance investment by running budget deficits. The problem here is that Europe’s leaders, most importantly the government of Germany, have insisted on policies to slow investment and  growth, not an inherent lack of investment capital in Italy.

Incredibly, while the piece complains repeatedly about protectionism, it does not mention the most important forms of protectionism of all, patent and copyright monopolies. This is especially bizarre in the context of the pandemic, since one of the big questions is whether any treatments or vaccines that are developed will be widely available or whether companies will use government-granted patent monopolies to charge high prices.

If China paves the way in developing a vaccine (it has as many vaccines in Phase III testing as the rest of the world combined) and carries through with its commitment to make any vaccine freely available to the whole world, then this will both be enormously important in and of itself, but also an incredibly valuable precedent. If a vaccine against the coronavirus can be distributed in a free market as a cheap generic, it is reasonable to ask why this should not be the case with all new drugs.

If this were to lead to new mechanisms for financing pharmaceutical research, and a worldwide free market in prescription drugs, it would imply a huge increase in globalization and an enormous gain for developing countries. The gains would be even larger if we moved beyond patent monopoly financing of research in areas like medical equipment, pesticides and fertilizers, and software.

This sort of globalization would be bad news for many U.S. corporations and many highly paid employees of these corporations, which is perhaps why the Washington Post never talks about it. But if we want to seriously discuss prospects for the future in a post-pandemic world, moving beyond patent and copyright monopolies has to be on the agenda.

  1. Ikonoclast
    July 1, 2020 at 12:18 am

    The original post states “An enormous amount of resources is now wasted on business travel.” This is true but even worse is the enormous waste of resources on international tourist travel. We have reached the position of being an over-populated world using many resources faster than the earth can replenish them. The world economy’s limits to growth have turned out not to be primary resource limits (fuels, minerals etc.) but the biosphere’s capacity to absorb wastes and system disruption. The wastes and disruptive processes of our industrial economy are introducing serious perturbations (leading to tipping point risks) into the climate, weather, oceans, ocean currents, soils, ecologies, ecological web of life balances, biogeochemical cycles and other processes. These disruptions in turn can and will catastrophically reduce the ability of the biosphere to provide ecological and biological services to human (and all other life).

    I agree that capitalist system issues like patent and copyright monopolies have to be on the agenda for change. Indeed most research, including medical and pharmaceutical research needs, must once again to be made statist; part and parcel of a national policy and not for private profit. But deeper than this certain liberal shibboleths will also have to be abandoned if we are to survive at all. Freedom of international movement will have to be seriously curtailed. Travel, migration and the global transfers of plants and animals themselves need to be curtailed.

    A major disruptor of the natural ecological “islanding” of continents after the Pre-Columbian era has been the modern movements of peoples: the migrations to the New World and to a lesser extent (in absolute scale) to the Oceania Region. Flowing with these processes were the transfers or transplanting of plants and animals to regions where they did not belong (in (in naturally evolved ecological terms). The ecological damage flowing from these transfers cannot be overstated. Exotic species do vast amounts of damage in every eco-system around the world.

    The world is also grossly over-populated with very few regions or countries still having an ecological footprint larger than their ecological overshoot limit. To put this another way, very few countries today are not in ecological overshoot. You could count them on one hand and all of them are countries with very little ecological capacity relatively and concomitantly small populations. These countries cannot in any way absorb any amount of immigration that would make a noticeable dint on the overpopulation of the rest of the globe. All these considerations indicate that migration is now not just a zero sum game but a negative sum game ecologically and demographically.

    The world needs to be ecologically “re-islanded”, at the continental level, to some considerable extent. The sustainability of populations needs to be tackled in situ. Moving around the problem with large migrations and counter-migrations is now (due to the ecological costs of the movements) a negative sum game. There would be exceptions within continental areas and regions. For example, I believe Australia should have a continuing responsibility to islands in the Oceania region, particularly with sea level rise and cyclone increases in mind. But the idea that Australia (for example) could take migration from the rest of the world that would in any way have an practical effect on overpopulation of the world outside Oceania is patently absurd.

    We need to approach these issues with hard realism as well as good moral philosophy. The notion that the collapsing West (and it is currently collapsing) can any longer play a role in directly absorbing global over-population is a liberal fantasy. However, we can play a role in dismantling capitalism and replacing it with democratic socialism in our own nations and in sharing technologies, medicines, birth control etc. freely with the third world without extracting capitalist rents. We can also take a role in not taking of our war machines to second and third world countries and sending worthwhile aid instead.

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